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Overestimating Others' Willingness to Pay

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  • Shane Frederick

Abstract

This article documents a widespread bias: a tendency to overestimate how much others will pay for goods. The effect may influence pricing and negotiations, which depend on accurate assessments of others' valuations. It is also shown to underlie or interact with several widely researched behavioral phenomena, including egocentric empathy gaps, the endowment effect, and the false-consensus effect.

Suggested Citation

  • Shane Frederick, 2012. "Overestimating Others' Willingness to Pay," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 39(1), pages 1-21.
    • Handle: RePEc:oup:jconrs:doi:10.1086/662060
    DOI: 10.1086/662060
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    Cited by:

    1. Baek, Eunsoo & Huang, Zhihong & Hwan (Mark) Lee, Seung, 2021. "More than what meets the eye: Understanding the effects of poly-contextual cues in online fashion retailing," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    2. Drichoutis, Andreas C. & Lusk, Jayson L. & Pappa, Valentina, 2016. "Elicitation formats and the WTA/WTP gap: A study of climate neutral foods," Food Policy, Elsevier, vol. 61(C), pages 141-155.
    3. Kim, Hyunji & Schnall, Simone, 2021. "Profit for friends, fairness for strangers: Social distance reverses the endowment effect in proxy decision making," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    4. Breitmoser, Yves, 2019. "Knowing me, imagining you: Projection and overbidding in auctions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 423-447.
    5. Drichoutis, Andreas C. & Vassilopoulos, Achilleas & Lusk, Jayson L. & Nayga, Rodolfo M. Jr., 2015. "Reference dependence, consequentiality and social desirability in value elicitation: A study of fair labor labeling," 143rd Joint EAAE/AAEA Seminar, March 25-27, 2015, Naples, Italy 202705, European Association of Agricultural Economists.
    6. William J. Matthews & Ana I. Gheorghiu & Mitchell J. Callan, 2016. "Why do we overestimate others' willingness to pay?," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(1), pages 21-39, January.
    7. Bing Han & David Hirshleifer & Johan Walden, 2023. "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving," Journal of Finance, American Finance Association, vol. 78(3), pages 1647-1704, June.
    8. Frondel Manuel & Sommer Stephan & Tomberg Lukas, 2019. "Versorgungssicherheit mit Strom: Empirische Evidenz auf Basis der Inferred-Valuation-Methode," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 68(1), pages 53-73, May.
    9. repec:cup:judgdm:v:11:y:2016:i:1:p:21-39 is not listed on IDEAS
    10. Ma, Shao-Chao & Xu, Jin-Hua & Fan, Ying, 2019. "Willingness to pay and preferences for alternative incentives to EV purchase subsidies: An empirical study in China," Energy Economics, Elsevier, vol. 81(C), pages 197-215.
    11. Rosato, Antonio & Tymula, Agnieszka, 2022. "A novel experimental test of truthful bidding in second-price auctions with real objects," MPRA Paper 115427, University Library of Munich, Germany.
    12. Laurent, Gilles, 2013. "EMAC Distinguished Marketing Scholar 2012," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 323-334.
    13. Cathy Cao & Xinyu Cao & Matthew Cashman & Madhav Kumar & Artem Timoshenko & Jeremy Yang & Shuyi Yu & Jerry Zhang & Yuting Zhu & Birger Wernerfelt, 2019. "How do successful scholars get their best research ideas? An exploration," Marketing Letters, Springer, vol. 30(3), pages 221-232, December.
    14. Breitmoser, Yves, 2017. "Knowing Me, Imagining You:," Rationality and Competition Discussion Paper Series 36, CRC TRR 190 Rationality and Competition.
    15. Nicole Koschate-Fischer & Katharina Wüllner, 2017. "New developments in behavioral pricing research," Journal of Business Economics, Springer, vol. 87(6), pages 809-875, August.
    16. Drichoutis, Andreas C. & Vassilopoulos, Achilleas & Lusk, Jayson & Nayga, Rodolfo M., 2015. "Fair farming: Preferences for fair labor certification using four elicitation methods," MPRA Paper 62546, University Library of Munich, Germany.

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